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President v. Jenkins

August 04, 2004

DEBORAH PRESIDENT AND PERRY PRESIDENT, PLAINTIFFS,
v.
DR. REGINALD JENKINS, DEFENDANT-APPELLANT, AND ST. BARNABAS MEDICAL CENTER, DR. LAMBERTO FLORES, DR. FRANCINE HUGHES, DR. JOHN DOE, DR. ROBERT ROE, (FICTITIOUS NAME), SALLY SMITH (FICTITIOUS NAME), XYZ BROKERAGE AGENCY, (FICTITIOUS NAME) AND PRINCETON INSURANCE COMPANY, DEFENDANTS, AND C&R INSURANCE AGENCY AND ZURICH INSURANCE COMPANY, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court, Appellate Division, whose opinion is reported at 357 N.J. Super. 288 (2003).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this insurance case, the Court considers two separate issues: (1) whether a "claims made" professional liability insurance policy issued by a successor insurer provides coverage for an asserted claim against its insured; and (2) whether the insurance agent breached its duty of care in procuring the policy for the insured.

Dr. Reginald Jenkins, a medical doctor specializing in obstetrics and gynecology, had hospital privileges at St. Barnabas Medical Center. In February 1987, he obtained medical malpractice coverage with Princeton Insurance Company (Princeton) under an "occurrence" policy that was renewed for successive one-year periods through February 1998. By letter dated January 9, 1998, however, Princeton notified Dr. Jenkins that his policy would be cancelled, retroactive to October 26, 1997, for failure to pay his overdue premium. In August 1997, Dr. Jenkins had discussed obtaining replacement medical malpractice insurance with Patrick O'Brien, a sales representative for C&R Insurance Agency (C&R), and an agent for Zurich Insurance Company (Zurich). Dr. Jenkins informed O'Brien that his policy with Princeton was due to expire at the beginning of February 1998. On January 8, 1998, Dr. Jenkins completed an insurance application with O'Brien, indicating that his Princeton insurance policy would expire on February 1, 1998, and representing that his professional liability insurance had never been "denied, cancelled, or not renewed." O'Brien advised Dr. Jenkins to pay his final premium to Princeton, but Dr. Jenkins failed to do so and never informed O'Brien that his Princeton policy was cancelled prior to February 1, 1998.

Zurich issued Dr. Jenkins a binder, a certificate of insurance (certificate), and an additional insured physician's endorsement #1 (endorsement #1). The binder identified February 1, 1998, to April 1, 1998, as the binder period, January 1, 1998, to January 1, 1999, as the policy period, and February 1, 1998, as the retroactive date. The certificate set February 1, 1998, as the policy's effective date, and January 1, 1999, as the policy's expiration date. The endorsement set January 1, 1998, as the effective date of the policy, January 1, 1999, as the expiration date of the policy, and February 1, 1998, as the effective date of the endorsement. C&R mailed Dr. Jenkins the Zurich insurance policy in April 1998 and the policy's cover page displayed in bold print that the policy was written on a "claims-made basis." The policy defined "policy period," but the retroactive date was neither defined nor set forth in the policy. Dr. Jenkins also received a declarations page for a group policy listing the policy period from January 1, 1998, to January 1, 1999, with a retroactive date of January 1, 1997.

On September 20. 1999, plaintiffs, Deborah and Perry President, filed a medical malpractice complaint against Dr. Jenkins based on injuries resulting from alleged negligence that occurred on January 3 and 4, 1998. Zurich declined coverage because the incident occurred prior to the policy's February 1, 1998, "retroactive" date. Plaintiffs amended their complaint to include additional defendants, including Princeton, Zurich and C&R. The claims were dismissed against all defendants except Dr. Jenkins. Dr. Jenkins amended his answer to include cross claims against Zurich and C&R. Zurich and C&R each moved for summary judgment and submitted documentation to demonstrate that Zurich provided no coverage prior to February 1, 1998, and that Dr. Jenkins informed C&R that his coverage with Princeton did not expire until February 1, 1998. Dr. Jenkins filed a cross-motion for summary judgment against Zurich and C&R.

The trial court denied Dr. Jenkins's cross-motion for summary judgment and granted summary judgment in favor of both the insurer and the agent. The Appellate Division affirmed the trial court's judgment with one member of the panel dissenting. The majority concluded that Dr. Jenkins's malpractice insurance policy with Zurich did not cover plaintiffs' claim and that C&R did not breach a professional duty of care in failing to bridge Dr. Jenkins's insurance coverage gap. The court found the policy clearly limited coverage to incidents that occurred on or after the February 1, 1998, retroactive date, which was exactly what Dr. Jenkins had requested. With respect to C&R, the majority faulted Dr. Jenkins for failing to inform C&R that his Princeton insurance policy was cancelled or in danger of being cancelled and found that there was no evidence from which a jury could reasonably conclude that Dr. Jenkins's insurance coverage gap was attributable to C&R's failure to exercise the requisite skill and diligence in procuring coverage. The dissent noted that none of the insurance documents defined "retroactive date," or distinguished that term from the policy's "effective date," rendering it ambiguous.

Dr. Jenkins argues that the Zurich policy is ambiguous and should therefore be construed in his favor. He contends that the use of the term "retroactive" is misleading and that neither the agent nor the policy language explained its significance. He acknowledges he requested coverage starting February 1, 1998, but argues that he believed he would receive the benefit of retroactive coverage commonly associated with a "claims made" policy. Zurich argues that Dr. Jenkins received the coverage he expected - "claims made" coverage after the retroactive date of February 1, 1998, when his Princeton "occurrence" policy was scheduled to terminate.

Because of the dissent in the Appellate Division, the case is before the Supreme Court as a matter of right, R. 2:2-1(a)(2). Prior to argument, the Court accorded amicus curiae status to the Professional Insurance Agents of New Jersey (Agents).

HELD: The insurance documents received by the insured were ambiguous and the evidence presented an issue of material fact concerning the insured's reasonable expectations. However, the insurance agent breached no duty of care to the insured.

1. When interpreting an insurance policy, courts should give the policy's words "their plain, ordinary meaning." Zacarias v. Allstate Ins. Co., 168 N.J. 590, 595 (2001). If the policy terms are clear, courts should interpret the policy as written and avoid writing a better insurance policy than the one purchased. Gibson v. Callaghan, The opinion of the court was delivered by: Justice Wallace

Argued January 6, 2004

In this insurance case, we consider two separate issues: (1) whether a "claims made" professional liability insurance policy issued by a successor insurer provides coverage for an asserted claim against its insured, and (2) whether the insurance agent breached its duty of care in procuring the policy for the insured. The trial court granted summary judgment in favor of both the insurer and the agent. The Appellate Division affirmed. President v. Jenkins, 357 N.J. Super. 288 (2003). Because of a dissent in the Appellate Division, id. at 318-325, the case is before us as a matter of right, R. 2:2-1(a)(2). Prior to argument, we accorded amicus curiae status to the Professional Insurance Agents of New Jersey (Agents). We now conclude that the insurance documents received by the insured were ambiguous and that the evidence presented an issue of material fact concerning the insured's reasonable expectations. However, we also conclude that the insurance agent breached no duty of care to the insured. Consequently, we reverse in part and affirm in part.

I.

The material facts are these. Dr. Reginald Jenkins, a medical doctor specializing in obstetrics and gynecology, had hospital privileges at St. Barnabas Medical Center. In February 1987, he obtained medical malpractice coverage with Princeton Insurance Company (Princeton) under an "occurrence" policy that was renewed for successive one-year periods through February 1998. Generally, an "occurrence" policy provides coverage for any asserted misconduct that occurs during the policy period, even if the claim is asserted after the policy expires.

In the Fall of 1997, Princeton informed Dr. Jenkins that it would cancel his insurance policy unless he paid his overdue premium. Dr. Jenkins failed to pay and Princeton notified him of the cancellation, retroactive to October 26, 1997, in a letter dated January 9, 1998. Consequently, the Princeton policy expired on October 26, 1997, instead of February 8, 1998.

In August 1997, Dr. Jenkins had discussed obtaining replacement medical malpractice insurance with Patrick O'Brien, a sales representative for C&R Insurance Agency (C&R). O'Brien informed Dr. Jenkins that he was an agent for Zurich Insurance Company (Zurich) and offered to sell him insurance coverage. Dr. Jenkins explained that he was currently insured by Princeton, but that his policy would expire at the beginning of February 1998. He completed a "Non-Binding Information Quote Form" and indicated that he was insured with Princeton under an "occurrence plus" policy and would require new coverage effective February 1998.

On January 8, 1998, Dr. Jenkins met with O'Brien and completed and signed an insurance application. However, Dr. Jenkins did not answer the questions concerning his requested effective date of coverage, insurance history for the previous three years, and whether his present coverage was "claims made." Dr. Jenkins indicated that his Princeton insurance policy expired on February 1, 1998, and that his professional liability insurance had never been "denied, cancelled, or not renewed." His signature appeared beneath the following statement:

I understand that the coverage offered is provided by a claims-made policy and that incidents that occurred prior to the prior acts or retroactive date are not covered and claims reported after the expiration date are not covered unless I purchase or otherwise obtain an extended reporting endorsement by Zurich.

At the meeting, Dr. Jenkins also asked O'Brien what he should do about the final payment he owed Princeton. O'Brien advised him to pay the premium promptly. Dr. Jenkins failed to pay the premium and never informed O'Brien that his Princeton policy was cancelled prior to February 1, 1998.

On January 12, 1998, Dr. Jenkins applied to Credit Corporation (AFCO) to finance his Zurich premium. The finance agreement, which Dr. Jenkins signed, dated, and faxed to C&R, noted the effective date of the Zurich policy was February 1, 1998.

Sometime later, Zurich, through C&R, issued Dr. Jenkins a binder, a certificate of insurance (certificate), and an additional insured physician's endorsement #1 (endorsement #1). The binder listed Dr. Jenkins as the insured and Zurich as the insurer. It identified February 1, 1998, to April 1, 1998, as the binder period, January 1, 1998, to January 1, 1999, as the policy period, and February 1, 1998, as the retroactive date. The certificate, which also named Dr. Jenkins as the insured and Zurich as the insurer, set February 1, 1998, as the policy's effective date, and January 1, 1999, as the policy's expiration date. The endorsement named Garden State Physicians Alliance (GSPA)*fn1 as the insured and Dr. Jenkins as an additional insured physician, with a retroactive date of February 1, 1998. It also set January 1, 1998, as the effective date of the policy, January 1, 1999, as the expiration date of the policy, and February 1, 1998, as the effective date of the endorsement.

C&R mailed Dr. Jenkins the Zurich insurance policy in April 1998. The cover letter declared the policy was written on a "claims-made basis" and included an extended reporting period at no additional premium charge. Further, the letter instructed Dr. Jenkins to "review the policy carefully making sure that all information disclosed on the Endorsement Pages is correct."

The Zurich policy's cover page displayed in bold print the following notice near the top of the page: "THIS POLICY PROVIDES CLAIMS MADE COVERAGE. CLAIMS MUST FIRST BE MADE AGAINST THE INSURED DURING THE POLICY PERIOD AND MUST BE REPORTED IN WRITING TO THE ZURICH INSURANCE COMPANY DURING THE POLICY PERIOD. PLEASE READ THE ENTIRE POLICY CAREFULLY."

Under the main heading of "Insuring Agreements" and the subheading of "Coverage Provided," the cover page contained the following:

Coverage B - Physician Professional Liability: We will pay on behalf of a physician, damages that the physician shall become legally obligated to pay because of a claim first made during the policy period arising out of a medical incident which occurred on or after the retroactive date and which is reported to us during the policy period.

[(Emphasis added).]

The policy defined "policy period" as "the period of coverage that begins at 12:01 a.m. on the inception date shown in the Declarations and ends at 12:01 a.m. on the expiration date or effective date of cancellation of this policy. The policy period does not include any extended reporting period." There was a reference in the coverage section limiting coverage to medical incidents that occurred after the retroactive date. However, the retroactive date was neither defined nor set forth in the policy.

With the policy, Dr. Jenkins received a declarations page for the group policy with GSPA as the named insured. It contained, in bold face, the reference to "claims made" coverage and listed a policy period from January 1, 1998, to January 1, 1999, with a retroactive date of January 1, 1997. Dr. Jenkins renewed the Zurich policy at the end of 1998 for the calendar year 1999.

A summary of the various dates on the insurance documents is as follows:

Summary of Insurance Documents Binder:

° Date of Issuance: 01/01/98

° Insurer: Zurich Insured: Dr. Jenkins

° Binder Period: 02/01/98 to 04/01/98

° Retroactive Date: 02/01/98

° Policy Period: 01/01/98 to 01/01/99 ...


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